The central bank controls inflation by influencing interest rates.
What are the three ways the central bank can combat inflation?
- Various Instruments the Federal Reserve Uses to Control Inflation,
- The Fed has a number of instruments that it has historically used to control inflation. The Federal Funds Rate, the Discount Rate, and Open Market Operations (OMO) are frequently used in tandem.
- The implementation of monetary policy by central banks is a crucial function in achieving price stability (low and stable inflation) and aiding in the management of economic volatility.
- Controlling the economy's money supply is a key monetary strategy for reducing inflation.
- Interest rates are impacted by the central bank, which in turn manages inflation.
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